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Oil: Global shares, oil drop after Trump tariff threat

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Equity markets, which have been largely expecting the two sides to reach a trade agreement soon, fell sharply as further talks to end their bruising trade war were thrown into doubt.

The trade war has resulted in billions of dollars of losses for both sides, while inflicting collateral damage on export-reliant economies and companies from Japan to Germany.

Chinese shares plunged more than 6 percent, while U.S. stock market futures fell 1.6 percent. Oil prices sank and the Chinese yuan weakened sharply.[.N]

The rout is set to continue in Europe. Financial spreadbetters expect Frankfurt’s DAX to open 1.7 percent lower at 12,207, and Paris’ CAC to open down 1.6 percent at 5,462. London is closed for a bank holiday.

Trump sharply escalated tensions between the world’s two largest economies with tweeted comments on Sunday that trade talks with China were proceeding “too slowly”, and that he would raise tariffs on $200 billion of Chinese goods to 25 percent on Friday from 10 percent.

He also said he would target a further $325 billion of Chinese goods with 25 percent tariffs “shortly”.

The tweets upended the previously calm market mood that had benefited from signs of improving economic growth in China and the United States, and from comments from Trump and other senior U.S. officials that trade talks were going well.

The Wall Street Journal reported on Monday that China was considering cancelling trade talks scheduled for this week following Trump’s threats. Conflicting later reports on Chinese Vice Premier Liu He’s travel plans added to market confusion.

“I think this has got the potential to be a real game-changer,” said Nick Twidale, Sydney-based analyst at Rakuten Securities Australia.

“There is still a question of whether this is one of the famous Trump negotiation tactics, or are we really going to see some drastic increase in tariffs. If it’s the latter, we’ll see massive downside pressure across all markets,” he said.

MSCI’s broadest index of Asia-Pacific shares outside Japan was down 1.9 percent in afternoon trade as markets across the region fell deep into the red.

Chinese blue-chips were down more than 6 percent, having closed higher before a three-day national holiday amid expectations that pressures on China’s economy were easing.

The drop in Chinese shares came despite a move on Monday by China’s central bank to cut reserve requirements for small banks to help boost lending to small and private firms.

Australian shares were off 0.8 percent.

Japanese financial markets remain closed until Tuesday for a national holiday, but Nikkei 225 futures were down 1.9 percent at 22,075, off the day’s lows.

E-Mini futures for the S&P 500 slid 1.6 percent, erasing memories of gains on Friday after the U.S. payroll data had helped to lift Wall Street, and signaling a rough open for U.S. stocks on Monday.

“The risk for (Trump) is that the Chinese don’t play ball and don’t go ahead with the negotiation,” said Shane Oliver, head of investment strategy at AMP in Sydney.

“It’s not in his interest for shares to go down as it would hit U.S. business confidence and investment, and that would shoot up unemployment. And that would be a risk for his re-election, too,” he said.

But economists at Citi painted a brighter picture of the outlook for Chinese markets following the recent stabilization of the Chinese economy.

“Should trade tensions resume, we expect a speedy reaction by China’s policy-makers, with policy implementation made more effective. Given the scope for fiscal and monetary stimulus is large in the near term, we believe the negative impact from additional tariffs will likely be managed better this time,” they said in a note.

 

MORE EASING ON THE WAY?

The flight from riskier assets boosted interest in safe havens, pushing U.S. Treasury futures up 16 ticks. Data from CME Group showed the market now sees a nearly 56 percent chance of a Federal Reserve rate cut by the end of the year.

Chinese 10-year treasury futures also jumped, with the most-traded contract, for June delivery rising as much as 0.5 percent. They were last up 0.27 percent at 96.855.

“The intensified trade and geopolitical risks are likely to prompt the regional central banks for more stimulatory policies,” analysts at ING said in a note. “We expect the majority of Asian central banks meeting this week to cut their policy rates.”

As investors flocked to the safe-haven yen, the dollar dropped 0.3 percent against the Japanese currency to 110.78.

But China’s yuan plunged, with the offshore unit weakening to 6.8215 per dollar, its weakest level since January 10, before paring some losses.

The onshore yuan weakened nearly 1 percent to 6.7980 per dollar before bouncing back to 6.7805.

In contrast to the sharp moves in Asian currencies, the euro was down less than 0.1 percent on the day at $1.1193, and the dollar index, which tracks the greenback against a basket of six major rivals, was up 0.06 percent at 97.579.

In commodity markets, Trump’s tweets sparked a plunge in oil prices. U.S. crude at one point dropped as much as 3.1 percent to a more-than-five-week low, before bouncing to $60.51 per barrel – still off 2.3 percent on the day.

Brent crude was 2.2 percent lower at $69.28 per barrel.

The tweets have compounded pressure on prices amid signs of a rise in U.S. output, which has surged by more than 2 million barrels per day since early 2018.

Spot gold jumped 0.25 percent to trade at $1,282.20 per ounce.

 

 


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24 Hours Across Africa

Apple unveils new iPhone 11 with a triple-camera

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Apple Inc (AAPL.O) caught up with hardware rivals on Tuesday by revealing a triple-camera iPhone, and it rolled out a streaming TV service priced at $5 a month, undercutting Disney and Netflix.

The announcements came at the company’s biggest marketing event, where it unveils its top products for the year ahead, and showcased an aggressive Apple ready to battle on price.

The long-awaited Apple TV+ streaming television service will be available in over 100 countries, starting in November. The service will not be available in China when it launches, nor will the Apple Arcade video game subscription.

Buyers of an iPhone, iPad or Mac will get a free year of streaming TV, potentially drawing hundreds of millions of viewers to the service. That catapults the new service into a rarified group of companies.

“I think the pricing on the Apple TV service was definitely a positive surprise,” said Michael James, managing director of equity trading at Wedbush Securities in Los Angeles. “That’s why you’re seeing the hammering in some of the other video service-related names like Netflix, Amazon and Roku. Clearly, that was a positive that people were happy to hear.”

There was no bundle with Apple Music or other services as some analysts had expected. But Ben Bajarin, an analyst with Creative Strategies, said the TV service, a $5 a month “Arcade” gaming service and the base model iPhone 11, seem designed to draw in users for the longer term.

“We weren’t expecting Apple Arcade and particularly Apple TV to be priced as aggressively as they were,” Bajarin said. “They know once consumers get into their ecosystem, they don’t leave.”

Apple said its new iPhone 11 will come with two back cameras, including an ultra wide-angle lens and the next generation of microchips, the A13. Prices start at $699, down from last year’s new iPhone that started at $749.

The more expensive iPhone 11 Pro will have three cameras on the back – wide angle, telephoto and ultra-wide. It can create videos with all three back cameras and the front camera at the same time and starts at $999. The iPhone 11 Pro Max with a bigger screen starts at $1,099. The new phones are available to order Friday and will start shipping Sept. 20.

Rivals including Huawei Technologies Co Ltd and Samsung Electronics Co Ltd (005930.KS) already sell phones with three cameras on the back. While Apple once tested the upper limits of what consumers would pay for a phone, it is now giving ground on prices, even making older models available at significant discounts to the latest technology.

“Consumers absolutely still care about cameras. That’s why it was surprising over the last couple of years that Samsung and Huawei got the jump on Apple,” said Patrick Moorhead, an analyst with Moor Insights & Strategy. “Apple was playing a bit of catch up, but Apple did bring their game, particularly on the video side of the camera, where I do think they’ll have the leg up.”

Analysts expect Apple will sell around 200 million iPhones in the next year, in addition to other devices, and while many of those will be in China, it ensures at least tens of millions of potential viewers for the subscription service.

Hal Eddins, chief economist for Apple shareholder Capital Investment Counsel, said Apple’s lower priced iPhones “aren’t exciting on the surface, but the low streaming price may suck in some new subscribers.” Apple shares gained 0.8%.

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24 Hours Across Africa

Oando has announced the discovery of Gas in Niger Delta

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Oando plc through its molecule subsidiary oando energy resources (OER) on wednesday said it has made a correlation gas and quantum discovery in its fields in the Niger delta

A disclosure sent to the Nigerian Stock Exchange said the project is a joint venture arrangement among the Nigerian National Petroleum Corporation (NNPC).

Details showed that the NNPC owns 60 per cent stake in the project, while Oando and NAOC, the operator controls 20 percent each.

The discoveries were made in the deeper sequences of the Obiafu-Obrikom fields, in OML61, onshore Niger Delta, the oil firm said.

The Obiafu-41 Deep appraisal/exploration well has reached a total depth of 4.374m encountering an important gas and condensate accumulation within the deltaic sequence of Oligocene age comprising more than 130m of high quality hydrocarbonbearing sands, it said.

The company added that the find amounts to about 1 trillion cubic feet of gas and 60 million barrels of associated condensate in the deep drilled sequences.

The discovery is part of a drilling campaign planned by the Joint Venture aimed at exploring near-field and deep pool opportunities as immediate time to market opportunities.

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